National Grid in urgent call for companies to reduce electricity usage

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The electricity transmission firm revealed it was forced to call on a range of measures when power reserves ran low, including buying power at short notice and asking industrial users to turn down their usage.

National Grid spent at least £2.5m after issuing a notice of inadequate system margin (NISM) on Wednesday afternoon asking power companies to provide more electricity. It paid the owner of Severn power station, Calon, about £2,500 per megawatt hour to provide an extra 500MW for two hours. On a normal day the typical cost for immediate power would be closer to £60 per megawatt hour.

National Grid also used one of two new powers designed to prevent power cuts. These have already cost the National Grid £36.5m to put in place – adding 50p to the average annual household energy bill – but incur extra costs when called on.

The first of these, the demand side balancing reserve (DSBR), saw companies agree to turn down the amount of power they were using by 40 megawatts. This is likely to have cost considerably less than £1m, according to a high-level industry source.

Flexitricity, a firm involved in the power demand reduction, said most of it was achieved by asking companies to turn off unnecessary air-conditioning. “At this time of year, there are often problems at power stations because of the end of the summer maintenance season,” the company’s chief strategy officer, Dr Alastair Martin.

The margin between supply and demand was “tighter than it has been for decades”, he said, but the firm had “several hundred megawatts across the portfolio which is ready in case things get worse”.

National Grid had only one other safety mechanism left at its disposal. Known as the supplemental balancing reserve (SBR), it would have involved paying companies to fire up mothballed power stations.

But industry figures said it would take several hours for the extra power to become available. That would have left Britain flirting with the possibility of “brownouts” – when lights are dimmed to prevent full-scale outages.

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“They went through three of their safety nets, so they certainly would have been nervous,” said Peter Atherton, an energy analyst at stockbroker Jefferies. “Their big danger would have been when it got dark and there was no wind around. If [Britain’s biggest power station] Sizewell had suddenly gone down, that would have been your nightmare scenario. It takes a while for power stations to fire up, you need a few hours’ notice.”

Labour’s energy spokeswoman said the government’s energy policy was increasing the risk of power cuts. “National Grid has now begun using emergency measures to prevent blackouts,” Lisa Nandy said. “The chopping and changing of energy policy under this government is creating an energy security crisis. It is preventing investment we now urgently need to keep the lights on and it could cause household bills to rise. David Cameron should step in and end the policy vacuum to get new power stations built as quickly as possible.”

Energy analysts said while a cold winter might not greatly increase the risk of power cuts, because most heating is supplied by gas, it could pose further problems for National Grid. If the company issues another NISM, it could be charged high prices that would eventually raise household energy bills.

The problems faced by National Grid on Wednesday were also likely to have affected small energy companies, many of which buy power at short notice. Market watchers said energy prices surged nearly tenfold after National Grid issued its warning, from £55 per megawatt hour to £500.